Register to leave a comment, or log in if you already have an account
What, also I believe it possible that Dibs has been escalating name-calling and insults to you to provoke a meeting. I’d not trust it under those circumstances – just my thinking. Insults do not usually result in friendship.
What, thank you for your letter above. What, would you please consider taking it easier on Mr. B.? Oh, What, I hope you don’t get too mad at me for bringing this up. Believe me, I have read your posts and am understanding your views on gentrification and (believe I) understand that that is non-negotiable with you. But Mr. B gives us a platform here, a place to discuss all kinds of things. It is as if he invites us into his cyber living room when he has no obligation to do so. He isn’t a bad guy and we can still say our views. Oh, What, you might be getting angry at me now, but I do not mean anything negative by this :-).
Chicken, thank you for giving me the picture of the whole world as fiat currency (didn’t know every country is fiat). Thanks too, for writing in layman’s language. I am afraid to ask exactly what you do, because then I may be too intimidated to write to you! :-). Must be in financial systems. What a wonderful subject to be educated in.
So you are from Zimbabwe, yes?
It sounds as if the world is one big “floating crap game” (pardon the language) right now. Big gamble, as in “hedge your bets” (hedge-funds); divert your dirivatives (move things around). Lots of non-existent money (?). Bubbles going up then coming down.
Or, from what you wrote me, I have an image of one big loose rubber band around planet earth (a few feet from the ground) that represents its financial situation (or atmosphere). In some places the rubber band is stretched thinner and more precariously than at others. Over the USA it may be close to breaking, no? Then the locations of the stretching band may shift and change for better and worse.
Thanks for the lessons. I am also reading a book and coincidentally, I randomly open the pages and find things similar that you are telling me. I must learn more about inflation movements. So now we put this together with trade (I think you wrote that). Hope this doesn’t all sound too dumb.
The What, I see you are busy posting today (23rd). Will await predictions.
Not much time to write now as we are dealing with a family situation — an elderly person. Bye for now.
Thank you for your kind comments BklynSoFar. It’s kind of related to my work so I probably should know it and the hardest part is to set it out in basic terms for a layperson to understand.
Iceland was a case where the banks brought the country down. Like Zimbabwe, they are not that important in terms of world trade so they are more susceptible to a devaluation. It’s quite interesting to note though that, since Iceland became bust, the Krona has “only” halved against the dollar (ie you get twice as many Krona for your dollar now). Sure, this is very painful for those holding Krona but is not really hyperinflation as it is usually understood (wheelbarrows of cash being used to buy a loaf of bread, etc). Even now, Iceland is not a particularly cheap place to visit as it was ludicrously expensive pre-crisis.
Zimbabwe is much more interesting as a case study though. When I was born, one Zim dollar (Rhodesia back then) was worth about the same as one US dollar. Today, one US dollar is worth nearly 8 BILLION Zim dollars. This was a long time coming and really accelerated towards the end as the hyperinflation feeds itself. If this happens in the US (and I don’t think it will anytime soon), you will have plenty of warning signs along the way.
Btw, I bought a zwd100bn note on ebay when they first printed it (to frame to remind myself of how precarious financial systems can be). There has been a banknote that was “bigger” – the hungarian pengo that was issued as a 1 trillion note but did not actually print out the zeros. Unfortunately, this was rendered obsolete when Zimbabwe printed the zwd100 trillion note – 1 followed by 14 zeros.
I will not rule out The What’s doomsday crash scenario but I do think it unlikely. I do think it will be painful for most people though.
Hello BklynSoFar I hope you are well. You see I have slacked off posting on Brownstoner because the Assheads complained about the amount of sand in their pussies. So I thought to myself “I need a break and they will have no one to blame”. You will notice here in “Brownstoner Land” all reality is suspended! The real world does not apply here and everything will be all right.
BklynSoFar I have a new crash call for this fall and I believe no one will “walk away” form this one. We are in a world of mess because greed and ignorance…
Chicken, thanks about euro currency. Yes, she says maybe she would end up paying $250.00 for a hamburger! Well, she has lived in enough different countries to be thinking along these lines.
Your letter was not *rambling*. I am amazed at how well you know this and can explain it so fast. Again I am printing your answer. I consider it a blessing that I can write this and boom!, out of cyber-space comes this explanation from a virtual stranger (the chicken)!
As far as Iceland, where I think you go often, I read that it is one big hedge-fund fund now, in danger of going to euros and kaput with krona currency. About fiat and the USA, I hear plenty of people are worried about what is going on at the G-20 meetings as far as tanking money. Someone made a joke that the G-20 is not something going on at Fashion Ave. 🙂
Her concern appears more about an imminent devaluation of the dollar against other currencies (primarily the euro in her case).
Now I’m not going to say that her concern is entirely unfounded – and it has been something many in the market have talked about as a possibility ever since around the time of the credit crunch.
Exchange rates between free markets are essentially self-balancing mechanisms. If the currency of one country gets too strong, then the other country will not buy as much product from them resulting in less demand for that currency and causing it to weaken. This can cause the exchange rate to make sizeable swings but generally reverts around a mean. One way of looking at this is purchase power parity (how much similar things cost in similarly developed countries). eg London and NY are fairly similar cities. If a pair of jeans costs £30 here and $50 in NY then you would say the right rate for PPP should be 1.6. Obviously this is a very simple example but you get the point.
There is also the theory of interest rate parity (commonly known as the carry trade), which compares the interest rates of two countries. This is mainly an academic theory that doesn’t really explain empirical exchange rate moves.
Devaluation (where the exchange rate makes a massive jump in a very short period of time) only comes at times of extreme distress – when people lose faith in the currency.
As far as I am aware, all current currencies around the world are fiat (ie they are only backed by the word of the prevailing government, rather than supported by any tangible asset such as gold). If you work for me and I pay you in “Chicken dollars”, you won’t accept them if I can just print off a whole bunch more without any effort – you would want me to limit their production to make them be valuable. The most recent example of the printing presses working overtime is with the Zimbabwe dollar which has tanked since 2006/07.
Although there’s been a lot of talk about other countries “losing faith in the dollar”, those countries are also big holders of dollars because they have done a lot of business with america. They stand to lose a lot if the dollar devalues so they tread very carefully. Note that a devalued dollar also stops america from importing as much as it otherwise would do.
What, also I believe it possible that Dibs has been escalating name-calling and insults to you to provoke a meeting. I’d not trust it under those circumstances – just my thinking. Insults do not usually result in friendship.
What, thank you for your letter above. What, would you please consider taking it easier on Mr. B.? Oh, What, I hope you don’t get too mad at me for bringing this up. Believe me, I have read your posts and am understanding your views on gentrification and (believe I) understand that that is non-negotiable with you. But Mr. B gives us a platform here, a place to discuss all kinds of things. It is as if he invites us into his cyber living room when he has no obligation to do so. He isn’t a bad guy and we can still say our views. Oh, What, you might be getting angry at me now, but I do not mean anything negative by this :-).
Chicken, thank you for giving me the picture of the whole world as fiat currency (didn’t know every country is fiat). Thanks too, for writing in layman’s language. I am afraid to ask exactly what you do, because then I may be too intimidated to write to you! :-). Must be in financial systems. What a wonderful subject to be educated in.
So you are from Zimbabwe, yes?
It sounds as if the world is one big “floating crap game” (pardon the language) right now. Big gamble, as in “hedge your bets” (hedge-funds); divert your dirivatives (move things around). Lots of non-existent money (?). Bubbles going up then coming down.
Or, from what you wrote me, I have an image of one big loose rubber band around planet earth (a few feet from the ground) that represents its financial situation (or atmosphere). In some places the rubber band is stretched thinner and more precariously than at others. Over the USA it may be close to breaking, no? Then the locations of the stretching band may shift and change for better and worse.
Thanks for the lessons. I am also reading a book and coincidentally, I randomly open the pages and find things similar that you are telling me. I must learn more about inflation movements. So now we put this together with trade (I think you wrote that). Hope this doesn’t all sound too dumb.
The What, I see you are busy posting today (23rd). Will await predictions.
Not much time to write now as we are dealing with a family situation — an elderly person. Bye for now.
Thank you again, Chicken. I have printed it because it is late. I will read it and get back to you.
Thank you also, What. I will try to get back to both of you tomorrow.
I didn’t get to check Wed. July 22, OT, thread either, over 600 comments!
Thank you for your kind comments BklynSoFar. It’s kind of related to my work so I probably should know it and the hardest part is to set it out in basic terms for a layperson to understand.
Iceland was a case where the banks brought the country down. Like Zimbabwe, they are not that important in terms of world trade so they are more susceptible to a devaluation. It’s quite interesting to note though that, since Iceland became bust, the Krona has “only” halved against the dollar (ie you get twice as many Krona for your dollar now). Sure, this is very painful for those holding Krona but is not really hyperinflation as it is usually understood (wheelbarrows of cash being used to buy a loaf of bread, etc). Even now, Iceland is not a particularly cheap place to visit as it was ludicrously expensive pre-crisis.
Zimbabwe is much more interesting as a case study though. When I was born, one Zim dollar (Rhodesia back then) was worth about the same as one US dollar. Today, one US dollar is worth nearly 8 BILLION Zim dollars. This was a long time coming and really accelerated towards the end as the hyperinflation feeds itself. If this happens in the US (and I don’t think it will anytime soon), you will have plenty of warning signs along the way.
Btw, I bought a zwd100bn note on ebay when they first printed it (to frame to remind myself of how precarious financial systems can be). There has been a banknote that was “bigger” – the hungarian pengo that was issued as a 1 trillion note but did not actually print out the zeros. Unfortunately, this was rendered obsolete when Zimbabwe printed the zwd100 trillion note – 1 followed by 14 zeros.
I will not rule out The What’s doomsday crash scenario but I do think it unlikely. I do think it will be painful for most people though.
Hello, What!
Posted by: BklynSoFar at July 21, 2009 6:14 PM
Hello BklynSoFar I hope you are well. You see I have slacked off posting on Brownstoner because the Assheads complained about the amount of sand in their pussies. So I thought to myself “I need a break and they will have no one to blame”. You will notice here in “Brownstoner Land” all reality is suspended! The real world does not apply here and everything will be all right.
BklynSoFar I have a new crash call for this fall and I believe no one will “walk away” form this one. We are in a world of mess because greed and ignorance…
The What
Someday this war is gonna end..
Chicken, thanks about euro currency. Yes, she says maybe she would end up paying $250.00 for a hamburger! Well, she has lived in enough different countries to be thinking along these lines.
Your letter was not *rambling*. I am amazed at how well you know this and can explain it so fast. Again I am printing your answer. I consider it a blessing that I can write this and boom!, out of cyber-space comes this explanation from a virtual stranger (the chicken)!
As far as Iceland, where I think you go often, I read that it is one big hedge-fund fund now, in danger of going to euros and kaput with krona currency. About fiat and the USA, I hear plenty of people are worried about what is going on at the G-20 meetings as far as tanking money. Someone made a joke that the G-20 is not something going on at Fashion Ave. 🙂
etson – thanks for comment.
Re: ‘chicken dollars’
See the blogwrap article post about Vox Pop shares.
no probs BklynSoFar.
Her concern appears more about an imminent devaluation of the dollar against other currencies (primarily the euro in her case).
Now I’m not going to say that her concern is entirely unfounded – and it has been something many in the market have talked about as a possibility ever since around the time of the credit crunch.
Exchange rates between free markets are essentially self-balancing mechanisms. If the currency of one country gets too strong, then the other country will not buy as much product from them resulting in less demand for that currency and causing it to weaken. This can cause the exchange rate to make sizeable swings but generally reverts around a mean. One way of looking at this is purchase power parity (how much similar things cost in similarly developed countries). eg London and NY are fairly similar cities. If a pair of jeans costs £30 here and $50 in NY then you would say the right rate for PPP should be 1.6. Obviously this is a very simple example but you get the point.
There is also the theory of interest rate parity (commonly known as the carry trade), which compares the interest rates of two countries. This is mainly an academic theory that doesn’t really explain empirical exchange rate moves.
Devaluation (where the exchange rate makes a massive jump in a very short period of time) only comes at times of extreme distress – when people lose faith in the currency.
As far as I am aware, all current currencies around the world are fiat (ie they are only backed by the word of the prevailing government, rather than supported by any tangible asset such as gold). If you work for me and I pay you in “Chicken dollars”, you won’t accept them if I can just print off a whole bunch more without any effort – you would want me to limit their production to make them be valuable. The most recent example of the printing presses working overtime is with the Zimbabwe dollar which has tanked since 2006/07.
Although there’s been a lot of talk about other countries “losing faith in the dollar”, those countries are also big holders of dollars because they have done a lot of business with america. They stand to lose a lot if the dollar devalues so they tread very carefully. Note that a devalued dollar also stops america from importing as much as it otherwise would do.
Sorry for rambling on.